DCIT CIRCLE-4(2), NEW DELHI vs. CITILAND COMMERCIAL CREDITS LTD., NEW DELHI

1. In view of the facts and circumstances of the case, whether the Ld. CIT(A) erred in facts and in law in allowing the appeal of the assessee ignoring the fact that the assessee had concealed its income by separating loan agreement from ‘Agreement to Sell’ and earned additional interest described as “loss of profit/cost in the ‘Agreement to Sell’.

2. The appellant craves leave for reserving the right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.”

“1. That on the facts of the case and in law, the appeal filed by DCIT Circle 4 (2) on 30.03.2021 against the CIT (A) order dated 3 22.10.2020 is a time barred appeal which is to be dismissed since not filed within stipulated period of 60 days from the date of receipt of the Appellate order.

2. That on the facts of the case and in law CIT (A) - 2 order as well as the order of ACIT Circle-6(1) u/s 143 (3) are both illegal, since based on erroneous foundation. No valid notice u/s 143 (2) was issued by the Jurisdictional AO. Notice u/s 143 (2) issued by a Non-Jurisdictional ITO Ward 3 (3), makes the assessment invalid and all consequent orders including order of CIT (A) -2 is also an illegal order. 3. i. That as per the CBDT directions in respect of jurisdiction for assessment of incomes in Delhi Ward ITO can make an assessment of incomes up to Rs. 30 Lacs and beyond Rs. 30 Lacs, it is to be assessed by the Circle Assistant Commissioner of Income Tax. ii. That the illegal assessment made without valid jurisdiction and confirmed by CIT (A)-2 be annulled.

4. The appellant craves leave for reserving the right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.”

6.1. The above argument is supported by Hon'ble SC in the case of DCIT VS Mastech Technologies P Ltd dated. 3.11.2022 in Civil Appeal No.8077 of 2022. The intention of the assessee may be apparently mala fide in not responding to the statutory notices within time with an intent to avoid the timely transfer of the case to his jurisdictional AO and in not raising any objection to the jurisdiction of the AO who had initiated the proceedings. Provision of Sub Section [3][b] of Section 124 of the Income Tax Act, 1961 clearly says that "No person shall be entitled to call in question the jurisdiction of an Assessing Officer- after the expiry of a specified time period.” 6.2 Section 292BB is also supporting our view where the assessee did appear in the proceedings but did not raise any such objection before the completion of the assessment. 6.3 Further, reliance is taken on the decision of the Hon'ble Delhi High Court in the case of Abhishek Jain Vs ITO dated 1.6.2018.

1. There is no error in the order of the Ld. CIT(A) in deleting the addition of Rs. 6,29,86,012/- towards alleged earning of additional interest in terms of Agreement to Sell: 1.1 Same issue has been favorably decided in the appellant own case for AY 2014-15 by CIT(A) 31 in appeal no. 246/18-19/10639/16-17 vide order dated 26.07.2019 and addition of Rs. 1,29,77,950/- is deleted. The issue is discussed under para 4.1 on internal Pg. No. 31&32 of appeal order (Pg. 38&39 of PB-II). Please refer Pg. No. 8 to 41, PB-II for CIT Order. The said deletion of similar additional interest of Rs. 1,29,77,950/- has been accepted by the IT department. There is no appeal against the order of CIT(A) for AY 2014-15. 1.2 CIT(A)-31 in the order for AY 2014-15 in the appellant's own case under para 4.1 at internal Pg. 32 has also relied upon the decision of CIT(A)-24 in order dated 20.11.2016 in the case of SA Developers Pvt. Ltd. - Appeal No. 75/2015-16-AY2013-14 wherein similar addition on account of additional interest on loans granted to same borrower M/s Oris Infrastructure Pvt. Ltd. was deleted. The above decision is also accepted by the IT department. No appeal is filed against the said order of CIT(A). 1.3 Ld. CIT (A) -2 while dealing with the instant case has discussed the issue under para 5&6 of the appellate order on page 6 to 8 and has accepted the contentions of the appellant that: a) No additional interest was received or accrued to the appellant. b) No corroborative evidence of having earned / received additional interest is brought on record by the AO. c) Affidavit furnished by the borrower Oris Infrastructure Pvt. Ltd. is also categorical in the rate of interest paid. The affidavit was accepted after a remand report from Ld. AO seeking dismissal of additional evidence. d) CIT(A) has also relied upon the decision of coordinate office of CIT(A)-31 in the case of the appellant for AY 2014-15 in appeal no. 246/18-19/10639/2016-17 dated 26.07.2019

“3.15 Therefore, an amount of Rs. 5,48,79,565/- is hereby added to the income of the assessee for additional interest earned by it on secured loans given as computed above. In the details given by the assessee vide its letter dated 8.10.2015, from which the above additions for income on account of additional interest has been computed, shows income from interest of Rs. 4,22,78,929/-. The assessee has also furnished details of interest earned on unsecured loans which provides detail of interest income to the tune of Rs. 30,76,958/-. The total of these two sums comes to Rs. 4,53,55,887/-. However, the amount of interest declared in the profit and loss account is Rs. 5,18,41,045/-. Thus, the assessee has under- reported its interest income in the details filed during scrutiny proceedings by Rs. 64,85,158/- (Rs. 5,18,41,045 Rs. 4,53,55,887). As the assessee has failed to provide the relevant information and discharge its onus, it is presumed that the assessee also earned additional interest on the loans relating to this interest income also which is estimated to be Rs. 81,06,447/- (64,85,158/ 16 X 20), assuming the rate of interest to be 16% p.a. and the rate of additional interest to be 20% р.а., and ordered to be added to the income of the assessee. Thus, a total amount of Rs. 6,29,86,012/- is hereby added to the income of the assessee for undisclosed interest income, including the amount of Rs. 5,48,79,565/- on secured loans whose details were furnished by the assessee and Rs. 81,06,447/- for loans whose details were not furnished.”

11. Ld. CIT(A) in order dated 24.07.2020 in paras no.6.1 to 6.3 has observed as under: “6.1 The issue is whether the appellant was in receipt of any additional interest, which has been termed as loss of profit or cost. Moreover, any such receipt is also contingent on the happening of another event i.e. rescinding of the contract. Admittedly, the AO has not brought on record any evidence which will go on to prove either of the two events. No evidence or documents have been brought on record by the AO to buttress his presumptions in this respect. It is an admitted fact that such a practice is followed by entities engaged in this line of business. This provides them with security with respect to amount advanced. It is generally in the nature of a collateral. 6.2 The affidavit furnished by the M/s Orris Infrastructure Pvt. Ltd. which was forwarded to the AO, is also categorical in the rate of interest paid. The AO at the stage of remand proceedings could have also undertaken necessary exercise to collect evidence in support of facts brought out during the course of assessment proceedings. No such exercise was carried out. Only the legality of its admittance is the subject matter of AO's report. Dismissal of the contentions raised by AO at the appellate stage in a cryptic manner, does not aid the addition made by the AO. In the absence of the same, the affidavit of the party has to be treated as a confirmation and non-rebuttal by the AO, makes its acceptance, a legal requirement. 8 6.3 The Ld. CIT(A) in the case of the appellant (for the AY 2014-15) vide Appeal No. 246/18-19/10639/16-17 dated 26.07.2019, has held that no addition can be made on notional income, without having been received or accrued. The decision was rendered on identical facts. There is no reason to differ from the said findings.